Review Questions and Answers for Chapter 11
... Net export spending can change for two nonprice-level-related reasons such as rising or falling national incomes in other countries and exchange rate changes unrelated to domestic price levels. 8. Identify the ways in which each of the following determinants would have to change if each was causing ...
... Net export spending can change for two nonprice-level-related reasons such as rising or falling national incomes in other countries and exchange rate changes unrelated to domestic price levels. 8. Identify the ways in which each of the following determinants would have to change if each was causing ...
Interest Rates and Their Role in the Economy during Transition. The
... Testing the relationship between inflation and interest rates is crucial for determining whether the decrease in inflation may lead to decrease in interest rates. This is very important for policy makers. The technique for estimating this relationship is provided by Fama (1975), (1977), Blejer (197 ...
... Testing the relationship between inflation and interest rates is crucial for determining whether the decrease in inflation may lead to decrease in interest rates. This is very important for policy makers. The technique for estimating this relationship is provided by Fama (1975), (1977), Blejer (197 ...
Are the Golden Years of Central Banking Over?
... Stefan Gerlach is Professor of Monetary Economics at the Institute for Monetary and Financial Stability at the Johann Wolfgang Goethe University in Frankfurt and a Research Fellow of the CEPR. Between 1992 and 2007, he served as an economist at the BIS. On leave from the BIS, in 2001-2004 he was Exe ...
... Stefan Gerlach is Professor of Monetary Economics at the Institute for Monetary and Financial Stability at the Johann Wolfgang Goethe University in Frankfurt and a Research Fellow of the CEPR. Between 1992 and 2007, he served as an economist at the BIS. On leave from the BIS, in 2001-2004 he was Exe ...
A Phillips Curve with an Ss Foundation Mark Gertler and John Leahy
... relative to time dependence, after allowing for the kinds of real rigidities thought to be important in the time-dependent literature. In Section II we lay out the basic features of the model: a simple New Keynesian framework, but with state-dependent as opposed to timedependent pricing. Firms face ...
... relative to time dependence, after allowing for the kinds of real rigidities thought to be important in the time-dependent literature. In Section II we lay out the basic features of the model: a simple New Keynesian framework, but with state-dependent as opposed to timedependent pricing. Firms face ...
International Economics, 10e (Krugman/Obstfeld/Melitz) Chapter 19
... Answer: For a given level of national saving, an increased current account surplus implies lower investment in domestic plant and equipment. A few reasons why: first, the returns to domestic savings may be easier to tax than those on assets abroad; second, an addition to the home capital stock may r ...
... Answer: For a given level of national saving, an increased current account surplus implies lower investment in domestic plant and equipment. A few reasons why: first, the returns to domestic savings may be easier to tax than those on assets abroad; second, an addition to the home capital stock may r ...
Monetary and Fiscal Policy with Sovereign Default
... to the Mexican economy which has experienced periods of high inflation and sovereign risk in the recent past. In addition, domestic nominal debt matters for the Mexican government.3 I study the Markov-perfect equilibrium of the public policy problem (see Klein et al., 2008). The government’s decisio ...
... to the Mexican economy which has experienced periods of high inflation and sovereign risk in the recent past. In addition, domestic nominal debt matters for the Mexican government.3 I study the Markov-perfect equilibrium of the public policy problem (see Klein et al., 2008). The government’s decisio ...
Monetary and Fiscal Policies in a Sudden Stop: Is tighter brigther
... procedure. First, estimating potential output and the corresponding output gap (defined as the difference between observed and potential output). This can be conducted basically by two methods: using time-series regression methods or estimating a production function. The second step is to estimate t ...
... procedure. First, estimating potential output and the corresponding output gap (defined as the difference between observed and potential output). This can be conducted basically by two methods: using time-series regression methods or estimating a production function. The second step is to estimate t ...
Forward Guidance and Macroeconomic Outcomes Since the Financial Crisis ∗ Jeffrey R. Campbell
... Fisher (2015). This preference generates a spread between the policy rate and the rate of return on capital, because government bonds yield benefits over and above the transfer of consumption from one period to the next. As such it is possible to simultaneously match key long-run features of aggrega ...
... Fisher (2015). This preference generates a spread between the policy rate and the rate of return on capital, because government bonds yield benefits over and above the transfer of consumption from one period to the next. As such it is possible to simultaneously match key long-run features of aggrega ...
2009-IV CENTRAL BANK OF THE REPUBLIC OF TURKEY
... some time. In this context, our medium-term forecasts envisage that the output gap—albeit closing faster than envisaged in the July Report—will remain disinflationary until mid-2012. Although global economic growth is expected to follow a gradual path, commodity prices continued along a rising trend ...
... some time. In this context, our medium-term forecasts envisage that the output gap—albeit closing faster than envisaged in the July Report—will remain disinflationary until mid-2012. Although global economic growth is expected to follow a gradual path, commodity prices continued along a rising trend ...
NBER WORKING PAPER SERIES DO FLEXIBLE DURABLE GOODS PRICES Robert Barsky
... monetary disturbances might have real effects; the intertemporal elasticity of substitution for purchases of durables is nearly infinite. The result is that a small, temporary increase in the relative price of durables causes a large shift of expenditure away from that sector.2 Monetary expansions i ...
... monetary disturbances might have real effects; the intertemporal elasticity of substitution for purchases of durables is nearly infinite. The result is that a small, temporary increase in the relative price of durables causes a large shift of expenditure away from that sector.2 Monetary expansions i ...
Nominal GDP Targeting Rules: Can They Stabilize the Economy?
... For example, sluggish money growth was seen to signal a slowdown in real GDP growth. As a result, easing monetary policy when money growth fell below target helped moderate declines in real GDP growth. The targets for the monetary aggregates were also expected to help policymakers achieve long-term ...
... For example, sluggish money growth was seen to signal a slowdown in real GDP growth. As a result, easing monetary policy when money growth fell below target helped moderate declines in real GDP growth. The targets for the monetary aggregates were also expected to help policymakers achieve long-term ...
Macroeconomic Factors and the Correlation of Stock and Bond
... This paper studies the comovement between stock returns and long-term government bond returns, and attempts to explain the economic driving forces behind this relationship. The correlation of stock and bond returns plays a pivotal role in investors’ diversification and asset allocation decisions. Ho ...
... This paper studies the comovement between stock returns and long-term government bond returns, and attempts to explain the economic driving forces behind this relationship. The correlation of stock and bond returns plays a pivotal role in investors’ diversification and asset allocation decisions. Ho ...
Measuring the Stance of Monetary Policy in Vietnam: A Structural
... ideas of policy transmissions; as well as estimate impacts of policy on macroeconomic variables. However, there have been a lot of difficulties that economic researchers have faced when they attempt to measure the stance of monetary policy. One of the greatest challenges is to determine which a poli ...
... ideas of policy transmissions; as well as estimate impacts of policy on macroeconomic variables. However, there have been a lot of difficulties that economic researchers have faced when they attempt to measure the stance of monetary policy. One of the greatest challenges is to determine which a poli ...
Multiple-choice questions to accompany
... a) it is added when measuring GDP, as an element of investment demand b) it is added when measuring GDP, as an element of consumption demand c) it is subtracted when measuring GDP, as an element of investment demand d) it is subtracted when measuring GDP, as an element of consumption demand 41. If t ...
... a) it is added when measuring GDP, as an element of investment demand b) it is added when measuring GDP, as an element of consumption demand c) it is subtracted when measuring GDP, as an element of investment demand d) it is subtracted when measuring GDP, as an element of consumption demand 41. If t ...
A Critique of Monetarist and Austrian Doctrines on the Utility and
... its effectiveness as a rationing device for household and business income over time—as Keynes himself recognized at one point. "One reason for holding cash," he observed without any particular emphasis, "is to bridge the interval between the receipt of income and its disbursement" (1936, 195). Keyne ...
... its effectiveness as a rationing device for household and business income over time—as Keynes himself recognized at one point. "One reason for holding cash," he observed without any particular emphasis, "is to bridge the interval between the receipt of income and its disbursement" (1936, 195). Keyne ...
Shifts from Deposits into Currency
... Borrowers can obtain funds in a financial market in two ways: debt and equity. The most common method is to issue a debt instrument, such as a bond or a mortgage. Debt instrument is a contractual agreement by the borrower to pay the holder of the instrument fixed amounts of interest and principal at ...
... Borrowers can obtain funds in a financial market in two ways: debt and equity. The most common method is to issue a debt instrument, such as a bond or a mortgage. Debt instrument is a contractual agreement by the borrower to pay the holder of the instrument fixed amounts of interest and principal at ...
Example
... sample of two (or more) variables and filters out random noise so as to find the underlying deterministic relationship among the variables. Example: A retailer suspects that monthly sales follow unemployment rate announcements with a onemonth lag. When the Bureau of Labor Statistics announces that t ...
... sample of two (or more) variables and filters out random noise so as to find the underlying deterministic relationship among the variables. Example: A retailer suspects that monthly sales follow unemployment rate announcements with a onemonth lag. When the Bureau of Labor Statistics announces that t ...
Standard Shocks in the OECD Interlink Model
... It is difficult, based on Table 2, to draw general conclusions on the adjustment path of the individual country models following a shock. Focus should be on the properties of the whole system rather than properties of single equations. For instance, the isolated effect of the high estimated sacrific ...
... It is difficult, based on Table 2, to draw general conclusions on the adjustment path of the individual country models following a shock. Focus should be on the properties of the whole system rather than properties of single equations. For instance, the isolated effect of the high estimated sacrific ...
the aggregate demand curve
... THE AGGREGATE DEMAND CURVE THE AGGREGATE DEMAND CURVE: A WARNING • A demand curve shows the quantity of output demanded (by an individual) at every price, ceteris paribus • We assume that other prices and income are fixed • The reason that the quantity demanded of a particular good falls ...
... THE AGGREGATE DEMAND CURVE THE AGGREGATE DEMAND CURVE: A WARNING • A demand curve shows the quantity of output demanded (by an individual) at every price, ceteris paribus • We assume that other prices and income are fixed • The reason that the quantity demanded of a particular good falls ...
commodity price fluctuations and macro - unu-wider
... Kaldor (1976) also argued that any large change in commodity prices will have a dampening effect on industrial activity, in addition to indirect price and wage effects. For example, commodity price inflation itself can have a deflationary effect on the effective demand for industrial goods (in real ...
... Kaldor (1976) also argued that any large change in commodity prices will have a dampening effect on industrial activity, in addition to indirect price and wage effects. For example, commodity price inflation itself can have a deflationary effect on the effective demand for industrial goods (in real ...
The role of inflation-linked bonds Increasing, but still modest
... government and that are held by risk-averse investors. The model offers two reasons why a government may find it unattractive to use inflation-linked bonds to finance its public debt. The most important one is liquidity risk. Because of liquidity risk, investors may be unwilling to step into ILBs. I ...
... government and that are held by risk-averse investors. The model offers two reasons why a government may find it unattractive to use inflation-linked bonds to finance its public debt. The most important one is liquidity risk. Because of liquidity risk, investors may be unwilling to step into ILBs. I ...
Chapter 7: The Demand for Money
... Suppose, on the other hand, the interest rate rose temporarily to 11%. Then the Joneses and others would find the cost of holding money had risen, and they would want to reduce their money balances in order to hold more of their assets in the form of bonds. As the Joneses and others try to purchase ...
... Suppose, on the other hand, the interest rate rose temporarily to 11%. Then the Joneses and others would find the cost of holding money had risen, and they would want to reduce their money balances in order to hold more of their assets in the form of bonds. As the Joneses and others try to purchase ...
Inflation
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the consumer price index) over time. The opposite of inflation is deflation.Inflation affects an economy in various ways, both positive and negative. Negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future.Inflation also has positive effects: Fundamentally, inflation gives everyone an incentive to spend and invest, because if they don't, their money will be worth less in the future. This increase in spending and investment can benefit the economy. However it may also lead to sub-optimal use of resources. Inflation reduces the real burden of debt, both public and private. If you have a fixed-rate mortgage on your house, your salary is likely to increase over time due to wage inflation, but your mortgage payment will stay the same. Over time, your mortgage payment will become a smaller percentage of your earnings, which means that you will have more money to spend. Inflation keeps nominal interest rates above zero, so that central banks can reduce interest rates, when necessary, to stimulate the economy. Inflation reduces unemployment to the extent that unemployment is caused by nominal wage rigidity. When demand for labor falls but nominal wages do not, as typically occurs during a recession, the supply and demand for labor cannot reach equilibrium, and unemployment results. By reducing the real value of a given nominal wage, inflation increases the demand for labor, and therefore reduces unemployment.Economists generally believe that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. However, money supply growth does not necessarily cause inflation. Some economists maintain that under the conditions of a liquidity trap, large monetary injections are like ""pushing on a string"". Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.Today, most economists favor a low and steady rate of inflation. Low (as opposed to zero or negative) inflation reduces the severity of economic recessions by enabling the labor market to adjust more quickly in a downturn, and reduces the risk that a liquidity trap prevents monetary policy from stabilizing the economy. The task of keeping the rate of inflation low and stable is usually given to monetary authorities. Generally, these monetary authorities are the central banks that control monetary policy through the setting of interest rates, through open market operations, and through the setting of banking reserve requirements.